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Expat buy to let market still strong after two rate rises, says broker

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Expat buy to let house purchase and remortgage enquiries are continuing at the high levels seen late last year, despite two increases in UK Base Rate this year, according to specialist expat mortgage brokers, Offshoreonline.

Offshoreonline’s Guy Stephenson comments, “Last year we saw several factors impacting the market. Covid obviously prevented many expats coming home to view houses, but that gap was filled in part by a surge in enquiries from Hong Kong as the political situation there changed. Hong Kong buyers are traditionally happy bidding for houses they have not visited, or they simply ask relatives to view for them. Brexit too continues to cast a long shadow over the markets for UK property buyers based in the EU. With no comprehensive financial settlement being part of the UK Brexit deal, many of the leading building societies have decided to stop lending to EU residents, until the position is clarified. This has limited the supply of lenders, but international banks, for example, are still active in the market.”

Offshoreonline notes that despite two UK Base Rate rises this year to bring the current rate to 0.5%, still very low by historic standards, few lenders have increased mortgage rates so far. Two year discounted products are available from 2.44%, with 80% lending available on a similar product at 3.35%. Fixed rates are attractive too, three year terms with a 1% fee are 3.19%, with a longer five year fixed period available at 3.95%.

With an increasing number of buyers opting for fixed rate loans, many have not been affected by the recent UK interest rate rises yet. Holders of Base Rate Tracker loans, for example, where the cost changes automatically as UK Base Rate moves, will have seen changes in their mortgage costs. Offshoreonline believes bank margins are still high and could be trimmed, if interest rates continue to rise, to soften the impact of further Base Rate rises. “Bank mortgage margins of 2.40% to 3.60% or higher over Base Rate are not unusual today, yet in the period before the  2008 financial crash, banks then made do with margins of 1% over Base Rate and sometimes less, “ adds Stephenson.

The UK property market is well regulated, transparent and still offers the kind of security many overseas investors seek and  with mortgage rates still low by long term standards, investing in UK property remains an attractive option for expat buyers.

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